Srei Infrastructure Finance Ltd has hiked its benchmark lending rate by 75 basis points to 17.5 per cent with immediate effect. The company’s Asset Liability Management Committee took the decision to raise interest rates after reviewing the trend of increasing interest rates to curb inflation, said a press statement from Srei.

“Hike in key policy rates by the Reserve Bank of India to contain high inflation and the resultant increase in interest rates by banks has necessitated this hike. We hope that any more rate hike by RBI will be minimal as the high interest rates have already slowed the growth momentum,” said Mr Hemant Kanoria, Chairman and Managing Director, Srei.

Monetary policy had its limitations in terms of containing inflation as many of the factors fuelling inflation were supply-side constraints, he pointed out. “There is an urgent need for fiscal measures to address these issues by scaling up capacity in infrastructure sectors. But if rates keep on increasing, it will adversely impact investments in infrastructure,” he added.

After the current rate hike, the RBI might now pause for sometime before reversing the cycle. “The impact of rate hikes is usually felt with a time lag. Thus the cumulative impact of the rate hikes will be felt for quite some time to come. It is easier a pull a string, but difficult to push it. Even when RBI reverses the cycle, the appetite for fresh investments will take some time to return. Till then we will have to settle for a moderation in GDP growth,” he explained.

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